Friday, August 30, 2013

This is a second in a series of posts, about where the State of California is headed.

The first is here. In that post, I took a look at the Nordic countries of Europe, and how their high quality governments arose out of a history of difficult geography and benign history. I noted that California has a similarly difficult geography and benign history, and that California has dealt with those challenges through a series of "big projects," the ultimate example of which is California's Master Plan for Education. Yet while both the Nordics and California have enjoyed subsequent economic success, they have developed very different levels of trust in government. To try to understand why California's culture has developed differently, I looked for a foil to California, a place with technical sophistication and high levels of education that is nonetheless suffering from economic stagnation -- a description that fits Japan.

Pretty much anyone growing up in the 1980s who was interested in economics and history spent a good deal of time looking at Japan. No-one considers Japan a model today; after 1989, Japan fell into a seemingly endless slump. However, this may have recently changed, given that Shinzō Abe's government appears to be having some success. Most economic analysts agree that Japan's situation is different from Europe's (Japan is no Greece) -- despite a national debt that stands at close to 250% of GDP, the debt is nearly entirely held domestically, and interest rates remain near the zero lower bound.

Instead, Japanese stagnation is attributed to culture. For instance, Abe is Japan’s first leader to treat entrepreneurs as something more than "greedy hustlers." As the Economist notes, "Venture-capital firms have few big payoffs to look forward to, with the result that there is a limited pool of cash available for those who do want to have a go at starting a business." But then the editors looked at another factor entirely -- the cultural obstacles to creating startups -- a factor that made me do a double-take:

"Wives, mothers and mothers-in-law exert a strong influence on men not to join risky start-ups ... [t]he success of the big firms born in Japan’s great period of post-war entrepreneurialism ... discouraged graduates from joining newer ventures ... [as a result] [e]xperienced managers are seldom keen to leave large companies."

What? In California, wives, mothers and mothers-in-law run start-ups. In Japan, am I to believe that the influence of these same individuals is limited to advising sons and husbands concerning their careers, rather than participating themselves in the economy? That cannot be correct. Educational statistics suggest Japanese women are some of the most educated in the world. Surely, that education gives them opportunities that they are motivated by the culture of their schools to deploy in the world at large.

Japan is nearly at the bottom of the rankings in the 2012 Global Gender Gap Report -- it was number 101 out of 135. Azerbaijan, Tajikistan, and Bangladesh all do better, for Japan is one of the industrialized world's least equal countries. Writing recently in the New York Times, Laura Tyson noted how comprehensively Japan's economy has been hobbled culturally:

"... [s]trong cultural norms value stay-at-home mothers. Tax distortions reinforce these norms and penalize two-worker households. Long working hours with overtime requirements make it difficult to balance work and family responsibilities. Child-care services are in acute short supply. There are long waiting lists for public child care, and a limited number of private providers because of burdensome regulations ... [w]omen are often caught in a Catch 22: they cannot secure a job until a child-care slot is available, and they are not eligible for such a slot until they have a job ... about 70 percent of Japanese women leave the work force after their first child. Only about 33 percent of Japanese mothers with young children work, compared with 50 to 60 percent in the United States, Britain and Germany, and 75 percent in Sweden ... [m]ost of the Japanese women who quit work for family responsibilities want to rejoin the work force but have a hard time doing so and face serious penalties in future wages and promotions."

This failure (I don't know what else to call it) of Japanese culture to engage women in the workplace is all the more peculiar given Japan's well known devotion to hard work, and further, given the extraordinary flexibility demonstrated by Japanese culture over time. From the end of Kaikin (Sakoku) with the arrival of the Kurofune, through the Meiji Restoration and into the Taishō period, Japan demonstrated exceptional cultural adaptability -- with this glaring exception.

There are any number of factors grounded in the Japanese cultural experience that can explain this issue, but there is an element of the Japanese view of the world, as expressed through language, that I find particularly interesting on this point. It comes down to two specific sets of kanji characters.

The first is米国, orBeikoku. The character 米, as a noun, generally means "rice," while the character 国 means "country." Combined, in Japanese, they mean "The United States."

There are a lot of explanations offered for this, but one suggested by Bill Emmott in his book "20:21 Vision" is that the Japanese chose this name for America in 1853, at the time of the Perry Expedition, and that the name is meant by the Japanese quite literally. Indeed, it is Emmott's view that America was (and was expected by the Japanese to continue to be) primarily a nation of farmers. (Yes, smart people can make serious mistakes.)

But the even more interesting piece of kanji is 英国, or Eikoku. The character 英, as an adjective, generally means outstanding, fine, or bright, and the second character, as in Beikoku, means "country." That is the Japanese name for "England."

Emmott (whose credentials as a journalist on Japan are exceptional) argues the name was adopted in the late 19th century, when the Japanese thought that what is our modern day United Kingdom was the country to be (and, probably, to beat). When Japan sought to modernize, in many respects, its model was Anglophilic -- for example, in 1870, an Imperial decree determined that the Royal (British) Navy should be the model for Japanese naval development, and the British model became the foundation of naval officer training and education. To this day, Anglophilia remains common in Japan -- for instance, both Crown Prince Naruhito, and his wife, Princess Masako, did postgraduate work at Oxford.

However, it is not the industrial spirit of the UK that appears to hold a cultural attraction for Japan. Instead, as one (rather popular) Japanese author, Nozomu Hayashi, has argued, the Japanese are drawn mostly to England's traditional attractions. Roast beef. Country houses. Patchwork quilts. The Japanese are not enamored of the England of Charles Dickens'Oliver Twist or Richard Branson'sVirgin Galactic, but instead look to the England of Julian Fellowes'Downton Abbey.

And this is one of the great peculiarities of the modern United Kingdom, and brings me to the end of this post, while pointing in the direction of the next. For, while internationally, the romantic country life of England retains its appeal, the impact of that yearning in the UK itself, for an arcadian rural society, has been a source of intense debate and criticism. That ideal has been blamed for holding back the United Kingdom from fully realizing the benefits of modern society. It is that ideal that has been held responsible for the preference by the commercial and industrial classes of the UK for sending their children to private schools where "the sons of businessmen were looked down upon and science was barely taught," that finds its start in the 1850s if not earlier. The ideal arguably reached its denouement with the collapse of James Callaghan's Labour government in 1979, and with the elevation to Prime Minister of a scientist -- a chemist, who specialized in x-ray crystallography -- with a prior portfolio as Secretary of State for Education and Science.

For it is to Margaret Thatcher and the UK that I turn to next. But again, a post for another day.

Tuesday, August 27, 2013

From time to time I take on blogging topics that are bigger than a single post. A friend asked me a couple of months ago "where do you think California is headed?" That's definitely one such topic, and this post is the start of an effort to answer that question.

When thinking about California's future, it's not unusual to draw comparisons concerning the recent experiences of other countries. In such conversations, the "Nordic" countries of Europe -- Switzerland, Sweden, Finland, Norway and Denmark -- usually get discussed. I don't think these are ultimately the most relevant international comparisons, but they're not a bad place to start.

The Economist recently ranked Switzerland as the best place to be born in the world in 2013. Their survey of the country in 2004 pointed out why -- for a small, landlocked country of 7 million, the Swiss have done well. The country is known for democracy, fairness, stability, quality, meticulousness, punctuality, thrift, efficiency, openness, reliability (whether a watch or a bank), good hotels, and great chocolate.

"Why has this remote, thinly populated region, with its freezing winters and expanses of wilderness, proved so successful?" asked the editors?

There was one factor in these countries' success that stood out, at least to me, and which is relevant to the future of California. The Economist noted that a key feature in the success of each of these countries is the quality of their governments:

"[T]he Nordic talent for government is sui generis. Nordic government arose from a combination of difficult geography and benign history. All the Nordic countries have small populations, which means that members of the ruling elites have to get on with each other. Their monarchs lived in relatively modest places and their barons had to strike bargains with independent-minded peasants and seafarers... [t]hey embraced liberalism early. Sweden guaranteed freedom of the press in 1766, and from the 1840s onwards it abolished preference for aristocrats in handing out top government jobs and created a meritocratic and corruption-free civil service ..."

California's history of "big projects," I (and a lot of other people) would argue, led to the creation of what the State calls its "Master Plan" for education. Starting in 1960, the State essentially decided that cheap (indeed, oftentimes free) higher education would be available to everyone. The effect of the Master Plan has been profound -- I have no problem agreeing with the assertion that California's economic dynamism results from the implementation of the Master Plan. Indeed, the Master Plan (despite its faults) has been a sterling example of the success of California's government.

California has also ended up with a liberalism that, at first glance, appears similar to if not the same as that of the Nordics. I don't generally think it's necessary to pull examples to support that argument, but here are a couple of strongdata points. Yet this is where the comparison with the Nordics starts to break down. The Economist argues that the experiences of the Nordics had an important cultural impact, which makes them different from many other countries to this day:

"The combination of geography and history has provided Nordic governments with two powerful resources: trust in strangers and belief in individual rights ... Economists say that high levels of trust result in lower transaction costs—there is no need to resort to American-style lawsuits or Italian-style quid-pro-quo deals in order to get things done. But its virtues go beyond that. Trust means that high-quality people join the civil service. Citizens pay their taxes and play by the rules. Government decisions are widely accepted."

This does not describe the popular perception of California. There are few people that would agree that California, in the last 40 years, has been a place high in trustin strangers. The State, in general, has very high quality civil servants (per the Economist, "it has never paid to bet against a state with as many inventive people as California"), but the voters of the State nonetheless undertook an effort to write tax avoidance into law. And California became an example of the most litigious State in America.

To try to understand how California enjoys a similar economic dynamism to the Nordics, but not their cultural advantages, it seems to make some sense to look for California's foil. That country would be a place every bit as technically advanced as California, that has similar cultural advantages to the Nordics, but at the same time, would be a country that would (tragically) lack economic dynamism. Sadly, there is such a place in the world. Since 1990, that country has been Japan.

Thursday, August 22, 2013

The Sacramento County Superior Court has issued its tentative ruling concerning whether the Highway 12 and Roseland Village redevelopment projects are (were?) enforceable obligations, and whether the County's "Successor" Agency is entitled to have ~$2.2 million returned.

I think it'd be easy to conclude that the County won, because the tentative ruling is that the projects are enforceable obligations. But it doesn't take 11 pages to say someone won and someone lost if it's clear.

As you'd expect, the County gets its bad news at the end of the tentative ruling, because the Court found that the County has not met its burden to show that it is entitled to reimbursement. Further, the "administrative expenses" that the County claimed didn't pass muster.

The Court does note that the County may have self-help remedies it could try to use to obtain the approximately $2.2 million redistributed to the "taxing entities." However, I think the Court is well aware that the "taxing entities" here are not faceless. Most of the $2.2 million the County seeks would merely be money moved from one County pocket to another -- with one important exception. When redevelopment ended, 34% of the dollars at issue for the Highway 12 project went to Sonoma Valley's schools -- in this case, probably about $400,000 (about another $400,000 went to schools in Roseland due to the Roseland Village project).

There are any number of ways to try to conceal that basic point, but the "bonus" money funding redevelopment was always coming from somewhere, and school budgets are that place, given Sonoma Valley's basic aid status.

The idea that the Court is going to order Sonoma Valley's schools to pay a $400,000 "reimbursement" to the County of Sonoma is ridiculous. As a practical matter, the Court is just not going to do that, if only due to the consistent failure of the State to meet its Prop. 98 constitutional funding requirements for years on end. Which means the County's suit was pretty much pointless, if the tentative ruling (you can read it here and the final ruling will be here) stands.

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